Dr. Pepper/Seven Up, Inc.

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Transcript of Dr. Pepper/Seven Up, Inc.

Dr. Pepper/Seven Up, Inc. & The Squirt Brand The brand manager of Dr. Pepper/Seven Up, Inc. (DPSU) responsible for the 'Squirt' brand, needs to draft the company's new advertising and promotion plan. Before proceeding, she needs to first redevelop the company's positioning and identify what target markets to pursue. She considered these 3 factors to be the most important in developing the advertising & promotion plan: Competitor activity by Coca-Cola & Pepsi-Cola Implications of a growing Hispanic community Squirt's decreased sales volume Dr. Pepper/Seven Up is the largest division of Cadbury Schweppes PLC.

Squirt is the best selling brand in the grapefruit carbonated soda category.

It also competes in the citrus carbonated soft drink category with Mountain Dew and Coca-Cola citrus brands Overview of DPSU Key Industry Facts The whole carbonated soft drink industry (CSD) sales figure in 2000 was $60.3 billion, however, in recent years sales growth has slowed.The production and distribution of CSD's is simplified as follows: The concentrate producer, such as Squirt, manufacture the basic flavor (in this case grapefruit) The bottler adds a sweetener (sugar or artificial sugar) to carbonated water and package the mixture in bottles and cans The bottlers are responsible for distributing the units to retailers and are also responsible for some local marketing activities The major retail channels for CSD's are supermarkets, convenience stores, vending machines, fountain services, mass merchandisers and small retail outlets. Restaurants buy a syrup and they add to it carbonated water, so they do the 'bottling' process.Flavored soft drinks have grown in popularity Introduction to Dr.Pepper/Seven Up, Inc. & Squirt Situational Analysis LA alone accounted for 30% of case sales volume CA accounted for 38% of case sales volumes NY is the largest market without a Squirt bottler 75% of Hispanics live in Western and Southern US 32.8% 43.5% 55.3% of Mexicans 31.7% of Mexicans 11 million Hispanics in CA 6.7 million Hispanics in TX San Antonio El Paso San Diego Squirt's Current Marketing Tactics Squirt's Positioning Squirt's Product Line Squirt's Distribution Squirt's Advertising & Promotion Our Recommendation Coca-Cola launched Fresca and Citra. Fresca is targeted at adults while Citra at the young generation. Squirt outsells both brands combined

However, Coca-Cola's advertising & promotion budget is a future indicator of worry because it is higher than Pepsi Cola's; $18.6 million and $16 million respectively.

Pepsi' Mountain Dew should be given the most attention: it is the leading brand in the citrus CSD category and its growth rate surpasses all competitors by far.Mountain Dew is the 4th top soft drink brand in the US Strengths Weaknesses Opportunities Threats SWOT Analysis •Squirt is the bestselling carbonated grapefruit soft drink brand in the US

•DPSU has a 14.7% market share of $60.3 billion = $8.86 billion

•Squirt available in 83% of bottler markets

•FCB research showed that Squirt was the most thirst quenching brand •Flavored soft drinks growing in popularity

•73% of consumers of Squirt are Caucasian Five Forces Analysis Buyer Bargaining Power - High Consumers control the bargaining power when it comes to the soft drink industry because soft drinks are not a necessity for every day life.

However, they don’t purchase large quantities and they favor such drinks to be placed in locations that are convenient to them.

This means that Squirt can be priced at a higher premium due to it being placed in convenient locations. Supplier Bargaining Power - Low Soft drink manufacturers has an advantage over its suppliers because they only have to produce the flavored syrup, the rest of the processes are delegated to distributors.

As a result, Squirt can more easily switch from one supplier to another. Competitive Rivalry - High Squirt faces a number of competitors that includes Coca-Cola’s grapefruit soft drink brands which are Fresca and Citra. It also competes with Mello Yello, Surge, Pepsi Cola’s Mountain Dew, and Sundrop. These competitors are trying to obtain Squirts market share by focusing more on their advertising. Threat of Substitutes - High Coca-Cola introduced its international brand, Fanta, with with different flavors to Southern California. Other flavors are a dangerous substitute

Squirt is free of caffeine, consumers might substitute non-caffeinated beverages with caffeinated ones (such as Mountain Dew) Threat of New Entrants - Low The market in which Squirt is in is 90% controlled by Dr. Pepper/Seven Up inc, Pepsi-Cola Company, and The Coca-Cola Company. These companies also manage the top 10 soft drink brands in the US. This indicates that trying to gain a large market share is not feasible but trying to enter the market is not impossible as well. History In 1938, the Squirt beverage was created by Herb Bishop from Arizona who recreated a non carbonated drink called Citrus Club. He used less sugar and fruit to create the carbonated version of it 1975 The international expansion of Squirt was in the 1970's and it happened that the first international markets were Central & South America (a foreshadowing perhaps) Squirt joined A&W which was eventually bought over by Cadbury Schweppes 1986 1995 1938 After Cadbury Schweppes bought DPSU, it assigned to it the responsibility of the Squirt brand in 1995 in the United States Even though Mountain Dew poses a threat with its enormous control of the citrus flavored CSD (carbonated soft drink) market share, the perceptual map plots Mountain Dew only hallway through the thirst-quenching & refreshing paradigm. This means that if Squirt positions itself as young and hip, it has an upper hand in not only reaching Mountain Dew’s position, but reaching its position armed with the additional attribute of being thirst-quenching. How Squirt can overcome these threats using its strengths How Squirt can overcome its weaknesses to capitalize on opportunities Squirt’s weakness of failing to appeal to the young can be countered by a new double barreled campaign that is aimed at young Hispanics. Hispanics have a median age of 25 and 35% of them are below the age of 18. So by targeting the Hispanic market, Squirt automatically has to simultaneously modify and redevelop its brand image to also appeal to the younger market segment. The effects of this targeting might even cause a spillover on the non-Hispanic youth market. 1996: 55.8 million cases out of a total of 768.4

1997: 55.7 million cases out of a total of 900.8

1998: 54.8 million cases out of a total of 964.4

1999: 56 million cases out of a total of 989.1

2000: 54.6 million cases out of a total of 981.8 Hispanic population size grew by 57.9% from 1990 to 2000 (35 million)

58.5% of Hispanics in the US are Mexican

Hispanics represent 12.5% of total US population

75% of Hispanics live in the western and southern United States

More than 50% of Hispanics live in California and Texas

From the top 9 Hispanic cities, 7 cities are in the west and south Squirt has the regular 'Squirt' grapefruit flavored soft drink and a diet version of that

Squirt also introduced a berry flavored extension called Ruby Red in both regular and diet versions There are 500 bottlers in the US, 250 of them bottle and sell Squirt beveragesThese bottlers have access to 83% of the US bottler market that represents 85% of the total soft drink volume, which is $1.2 billionThe Los Angeles bottler market alone represented 30% of Squirt SalesThere are 100 Squirt in the western US and accounted for half of Squirt's SalesCalifornia alone represented 38% of Squirt sales Squirt's media advertising include inserts in newspapers, spot & cable television and radioPromotions are used with retail channels, consumers, trade channels and cooperative ads with bottlersHighest brand awareness in the grapefruit category due to advertisingSquirt spends more on promotions than on media advertisingTotal advertising and promotion expenditure was 25% of sales, which is $390,000 Initially, Squirt was positioned as a 'cool, experiential, and incredibly exciting'. This was considered too intense and was toned down

The current positioning became related to 'everyday, on the go experiences' that put emphasis individualistic and sociable young adults.

Target market narrowed down to 18-34 year olds

The original thirst quenching attribute was not changed in the new positioning scheme

Research, however, showed that Squirt's messages were too 'juvenile' for both young and older consumers Their sales volume grew from 605 million in 1996 to 809 cases in 2000 Mountain Dew also spent $28.9 million in 1996 Adopt FCB's Recommendation A Mix of East & West Maintain the Current Strategy What Can Squirt Do? According to Foote, Cone & Belding (FCB) the 18-24 age group is the heaviest consumer of soft drinksThe thirst quenching attribute is to be reemphasized, but advertising would focus solely on 21-24 year olds to position the brand as an individualistic, exciting and spontaneousFCB believes that such positioning is relevant to the CSD industry, emphasizes instant gratification, freedom that young adults like and it matches Squirt's product feelThe positive side of their recommendation is that currently, the 20-29 age group is the least segment that consumes SquirtTheir emphasis on a multicultural young segment is of great significance The 'Mexican Connection' Mexico is the 2nd largest CSD market in the world, and Squirt is 8th largest CSD brand in Mexico

The grapefruit CSD category is the second largest in Mexico, after the cola category, and within that category Squirt comes second

More than half of America's Hispanics are Mexican and 77% of California's Hispanics are Mexican which also happens to be Squirt's largest market

FCB's recommendation, as a result, is aligned with geographic opportunities and conditions 77% of Hispanics are Mexican FCB's recommendation is very relevant to market, demographic and cultural conditionsIt capitalizes on the key and opportunistic growth of the Hispanic community as well as the association that exists between the younger generation and the consumption of soft drinksOne major aspect that FCB did not take into account was the eastern United States; even though 75% of Hispanics live in the west & south, New York is the most populous Hispanic city in the US with 2.1 million Hispanics. Chicago (in the Midwest) is the 3rd most populous Hispanic city with 753,000 Hispanics Squirt has the least access to the New York market and New York has the largest Hispanic population. This is a gold mine for Squirt Most of Squirt's consumers are Caucasian, so why should they risk losing this large customer base by modifying their ad and promotion campaign to suit Hispanic and African American tastes? Squirt is doing better than Coca-Cola's Citra; consumers think that it does not appeal to them and that Squirt effectively communicated to them the intended thirst quenching messageSales only went down from 55.8 million cases to 54.6 million cases, which is not a large decrease compared to Coca-Cola's sales decrease Changing the current marketing strategy might risk Squirt's advantage over Citra and in terms of sales and brand awareness, Squirt has good footing in the citrus and grapefruit category "Squirt should target the multicultural 18-24 age group in western, southern and eastern United States" Squirt should now spend more on media advertising than on promotions because in order to effectively target the Hispanic community, a message must be clearly communicated55% of Hispanics prefer ads in Spanish which means that Squirt should create Spanish language ads, but at the same time, create English language ads that appeal to Hispanic culture because 30% of them prefer English adsThe nature of brands should reflect Hispanic people's preference for authenticity and clarity in messages and adsHispanics like shopping close to home, Squirt can easily capitalize because of the extensive distribution network it has in the west (100 bottlers in CA)This also means that contracts need to be made with bottlers in the New York area in order to satisfy their preference for proximityIn addition to creating a campaign to satisfy Hispanic preferences, the 18-24 age group must also be effectively targetedSquirt must now position itself not only as a thirst quenching brand (which young people like), but also as young, hip and individualistic This dual targeting and positioning scheme will definitely require a higher advertising budget, but the truth is, Squirt's sales volume does not reflect the potential that both the Hispanic and 18-24 segments have Thank You